how do swaps work?

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80655261
23
80655261  
can anyone tell me how the swap works? does it ever leave once it is imposed?
Marco vd Heijden
Moderator
8176
Marco vd Heijden  

It's either positive or negative and happens overnight due to exchange rates.(except for crypto of course in that case it's just theft)

You can see it in the instrument specification by left clicking the instrument name.

kypa
983
kypa  
Some brokers offer Islamist accounts without swap. You might pay higher spreads on those though.
Alain Verleyen
36141
Alain Verleyen  
kypa:
Some brokers offer Islamist accounts without swap. You might pay higher spreads on those though.
Islamist ? You probably mean islamic.
Anthony Garot
1817
Anthony Garot  
Marco vd Heijden:

It's either positive or negative

Or negative and negative depending upon your broker and symbol.

For example, as of this posting, FxPros swaps for USDCAD are:

Swap Long: -1.74 Points

Swap Short: -5.13 Points

Marco vd Heijden
Moderator
8176
Marco vd Heijden  
Yes i have seen that too but it kinda defies the logic behind closing and reopening the positions because how can both directions be negative?
Samih Abdelli
178
Samih Abdelli  

there is a fine article about swap in wikipedia,  if anyone is intrested

https://en.wikipedia.org/wiki/Swap_(finance)

Alain Verleyen
36141
Alain Verleyen  
Marco vd Heijden:
Yes i have seen that too but it kinda defies the logic behind closing and reopening the positions because how can both directions be negative?
Because the broker takes his part. Such broker should probably be avoided.
Wasim Zayed
648
Wasim Zayed  

Basically the swaps are calculated from this formula

Swap = (Pip Value * Swap Rate * Number of Nights) / 10

But this is only for your reference, usually brokers add premium to this calculations according to the books.

Marco vd Heijden
Moderator
8176
Marco vd Heijden  
Alain Verleyen:
Because the broker takes his part. Such broker should probably be avoided.

This is exactly what i was thinking and especially when you look at crypto because of course they will not close and reopen the position on the blockchain and so it's in plain sight that there is something wrong with this.

It look more or less like a mechanism of collecting or nibbling away customers capital on a daily basis.

Wasim Zayed
648
Wasim Zayed  
Marco vd Heijden:

This is exactly what i was thinking and especially when you look at crypto because of course they will not close and reopen the position on the blockchain and so it's in plain sight that there is something wrong with this.

It look more or less like a mechanism of collecting or nibbling away customers capital on a daily basis.

You missed the point from the swaps my friend, why do traders pay the swaps in first place ?

they pay it because traders borrowed the money ( the leverage money) from the broker to trade bigger amounts! If you traded 1:1 ratio and you kept the money in your pocket will not pay any swap.

and this borrowing action has to have a cost, this cost is the swaps... it has nothing to do with nibbling away customers capital.

12
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